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“Demand for heifer calves for both stocker programs and rebuilding cow inventories could increase if precipitation is enough this fall to enable cool-season pasture development this winter, and if prospects improve for pasture growth in 2013,” say analysts with the USDA Economic Research Service in the monthly Livestock, Dairy and Poultry Outlook released last week.

According to the Agricultural Marketing Service (AMS) on Friday, calves and yearlings sold steady to $3 higher last week with instances of $6 higher for calves in or near wheat pasture country.

“Cash feeder cattle prices have made slow, steady advances ever since the first week of August when the fed cattle market saw an abrupt turnaround. Since then, modest rains have been realized in many of the hardest hit drought areas, and buyers of every class of cattle have become more intent on making sure their cupboards aren’t empty should record prices come around again,” AMS analysts say.

Even with the price recovery of recent weeks, though, the AMS folks note, “Calf prices are a good $20-$30/cwt. below mid-March 2012, and yearlings are $5-$10 behind, although the Northern Plains are closing in quickly.”

Fed cattle prices have made some inroads in recent weeks, too, boosted by stabilizing wholesale beef values. But cash fed cattle traded steady to $1 lower last week ($126 on a live basis) and cutout values grew softer again.

“…fed cattle prices could be pressured if feedlot managers are not marketing finished cattle in as timely a manner as previously thought. Evidence supporting a possible buildup includes higher dressed weights, a larger number of cattle on feed for more than 120 days, and higher dressing percentages,” say analysts with USDA’s Economic Research Service (ERS) in this month’s Livestock, Dairy and Poultry Outlook.

“A lot of the price drive the past few weeks was due to low fed cattle marketings in August,” says Andrew P. Griffith, University of Tennessee ag economist, in his weekly livestock comments. “Demand is not at its strongest during August, but a dip in supply can provide support for prices. Feeder margins have been improving as feed costs have declined slightly and as the fed cattle price has increased...”

According to the most recent Historical and Projected Kansas Feedlot Net Returns, cattle feeders have a chance to make a few dollars, or at least lose a whole lot less, toward the end of the last quarter this year and heading into 2013. Net return per head (steers) is projected at $14 in December and a negative $18.30 in January. For perspective, net return for steers was estimated at a negative $238/head in August and $265 the month before that.

Markets could receive some spark in the short term from Friday’s bullish Cattle on Feed report (see “Lower Cattle Placements – Snugger Supply”). Friday’s USDA monthly Cold Storage report is also at least neutral, with beef supplies in cold storage 7% less than a month earlier, though up slightly from a year earlier. On the other hand, total red meat supplies in freezers are 16% more than a year earlier.

“Weekly wholesale cutout values have recovered somewhat since their lows in late-July and early August and are above year-earlier values,” say ERS analysts. “Despite this, improving fed cattle prices have pressured packer margins, which have deteriorated recently…

“…While the demand for ground product appears to be providing ongoing price support to the All-Fresh beef price of which it is a component, it does not seem to be sufficient to completely offset the negative pressure associated with the end of the summer grilling season.”

Discuss this Article 2

Another interesting report from BEEF, thanks for keeping us up to date with what’s going on in the cattle industry and reporting it with all the facts and figures. At least the cold storage report is neutral which means it could go either way so let’s hope for the best.

Let’s hope that the heavens open soon and these areas that are so dry get some serious rain this year as this will really help the beef market improve and see calf prices catch up. Even though the opportunity seems to be there to make some profits in the following seasons it’s still an unreliable market where no-one can be sure what’s going to happen and it all depends on the beef demand from now on.